Final (Winter 2010)

# Final (Winter 2010) - Introduction to Applied Econometrics...

This preview shows pages 1–4. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Introduction to Applied Econometrics Final Do not turn page until told to do so! Name: ID & TA: Richard Walker, Winter 2010 Introduction to Applied Econometrics Richard Walker, Winter 2010 Final Name: ID & TA: (100points) Answer all questions, using the spaces provided. There is room for doodling at the back. 25pts 1. I am investigating the determinants of educational attainment, measured by years of schooling S . I suspect the true data-generating process is given by:. S i = β 1 + β 2 BRAINS i + β 3 SM i + β 4 SF i + u i (1) The educational attainment of individual i thus depends on her innate intelligence BRAINS i , on her mother’s years of schooling SM i and on her father’s years of schooling SF i . I have data on S , SM and SF but not on BRAINS , which is unobservable. I do have data on each individual’s score on an intelligence test, IQ i . (a) (15pts) Suppose IQ is only an imperfect proxy for BRAINS . The relationship between the two is given by: IQ i = α 1 + α 2 BRAINS i + i (2) where α 1 and α 2 are unknown positive parameters and i is an error term. I consider using OLS to estimate β 2 in (1), with IQ in place of BRAINS . Show that assumption B7 is violated if I do this. Be sure explicitly to state this assumption. What would be the consequences of using IQ as a proxy for BRAINS in this manner? 25pts 281/final – Page 3 of 12 – Name: (b) (10pts) Now assume instead that IQ is a perfect proxy for BRAINS , i.e. the following equation holds: IQ i = α 1 + α 2 BRAINS i (3) I want to test the null hypothesis that mother’s and father’s years of schooling are equally important for an individual’s own educational attainment, i.e. H : β 3 = β 4 . Derive a regression equation that I can estimate given the available data, and which I can use to test this null hypothesis...
View Full Document

{[ snackBarMessage ]}

### Page1 / 12

Final (Winter 2010) - Introduction to Applied Econometrics...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online